020 7898 0500The headline inflation figure for the UK pushed towards a four-year high for the UK. It moved from 2.7% up to 2.9%, just below the threshold where the Bank of England’s Mark Carney would have to write a letter to the Chancellor of the Exchequer to explain why it is over a percent higher than target. It was reported that the price of package holidays and imported computer games pushed inflation higher. The drop in the value of sterling since last year’s EU referendum has increased the cost of imports which is also reflected across food and clothing.
Under normal market conditions, higher inflation would be a precursor for an increase in interest rates as it is a sign of a growing economy. However, we are not in normal market conditions and the pace of inflation is outpacing wage growth, resulting in further squeezing on household earnings and therefore living standards will be affected in the near future.
Meanwhile, Prime Minister Theresa May left Downing Street with no comment to the media regarding talks with the DUP, despite being explicitly asked whether she had done a deal.
On the docket today, the markets will keep a close eye on the employment data, especially the average earnings, which are set to confirm that inflation has continued to outpace wage growth. In addition, the claimant change will be under the microscope, as will any further political developments.
